Reich writes: "To hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That's misleading at best."
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Obama's Tax Plan and the Lies of the Regressives
10 July 12
o hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That's misleading at best. He's proposing that everyone receive a continuation of the Bush tax cuts on the first $250,000 of their incomes. Any dollars they earn in excess of $250,000 will be taxed at the old Clinton-era rates.
Get it? Everyone is treated exactly the same. Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income. No "class warfare."
Yet regressive Republicans want Americans to believe differently. The editorial writers of the Wall Street Journal say the President wants to extend the Bush tax cuts only "for some taxpayers." They urge House Republicans to extend the Bush tax cuts for "everyone" and thereby put Senate Democrats on the spot by "forcing them to choose between extending rates for everyone and accepting Mr. Obama's tax increase."
Pure Demagoguery.
Regressives also want Americans to think the President's proposal would hurt "tens of thousands of job-creating businesses," as the Journal puts it.
More Baloney.
A small business owner earning $251,000 would pay the Bush rate on the first $250,000 and the old Clinton rate on just $1,000.
Congress's Joint Tax Committee estimates that in 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling – and, again, they'd pay additional taxes only on dollars earned above $250,000.
All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold.
A third lie is Obama's proposal will "increase uncertainly and further retard investment and job creation," as the Journal puts it.
Don't believe it.
The real reason businesses aren't creating more jobs is American consumers - whose purchases constitute 70 percent of U.S. economic activity - don't have the money to buy more, and they can no longer borrow as before. Businesses won't invest and hire without consumers. Even as executive pay keeps rising, the median wage keeps dropping - largely because businesses keep whacking payrolls.
The only people who'd have to pay substantially more taxes under Obama's proposal are those earning far in excess of $250,000 - and they aren't small businesses. They're the fattest of corpulent felines. Their spending will not be affected if their official tax rate rises from the Bush 35 percent to the Bill Clinton 39.6 percent.
In fact, most of these people's income is unearned - capital gains and dividends that are now taxed at only 15 percent. If the Bush tax cuts expire on schedule, the capital gains rate would return to the same 20 percent it was under Bill Clinton (the Affordable Care Act would add a 3.8 percent surcharge).
Funny, I don't remember the economy suffering under Bill Clinton's taxes. I was in Clinton's cabinet, so perhaps my memory is self-serving. But I seem to recall that the economy generated 22 million net new jobs during those years, unemployment fell dramatically, almost everyone's income grew, poverty dropped, and the economy soared. In fact, it was the strongest and best economy we've had in anyone's memory.
In sum: Don't fall for these big lies - Obama wants to extend the Bush tax cut "only for some people," small businesses will be badly hit, businesses won't hire because of uncertainty this proposal would create, or the Clinton-era tax levels crippled the economy.
A ton of corporate and billionaire money is behind these lies and others like them, as well as formidable mouthpieces of the regressive right such as Rupert Murdoch's Wall Street Journal editorial page.
The truth is already a casualty of this election year. That's why it's so important for you to spread it.
Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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He states it is pure demagoguery that the WSJ claims that "tens of thousands of job creating business" would be hurt by Obama's plan. Then a couple lines later he states that for 2013 there would be 940,000 taxpayers that would "break the 250,000 ceiling".
Is not 940,000 more than "tens of thousands"? I think so.
Then he tries to hide the large number that would be effected by stating that only 3% would be taxed. I think the 940,000 is a large number, regardless of the percentage.
Regarding the uncertainty claim. IF Obama gets this passed, then just what will the tax rate be for the year following? Don't know? Then that would seem to be a bit of uncertainty.
Nice that he slides by the more than 50% increase in cap gains tax rate (when Obamatax of 3.8% is included) from 15% to 23.8%. Wonder what a 50% tax increase will do to the market? Can you say "correction" or "bear market" or maybe even "crash"?
Finally,if someone is paying "x" in taxes and following a change if the amount is "x plus y" then that is an increase and if that increase only happens to some people then (who happen to be rich) then Obama IS taxing only the rich. Maybe Reich has trouble with English.
940,000 taxpayers does not translate to 940,000 job creating businesses. And then after making a fudge based on not using labels (2nd grade, remember - 'Label your work') you claim that a large number is large no matter the actual impact. 3% means that out every 100 people only 3 would see any increase in taxes. We use percentages so that information is understood, in order to make your point you again ignore what you were taught in the 2nd grade.
What uncertainty? There is always uncertainty in business. In this I would say that the Uncertainty ghost is the kissin' cousin of what Paul Krugman call the Confidence Fairy. Lets deal with our own world and stop trying to obscure economic reality with mythological beings, whose existence cannot be determined.
So what has the 15% tax rate done to the market? From what I can tell that money that remains with overwhelmingly the 1% is somewhere off shore propping up some dictator or just relaxing in a bank. How about we get it back intothe USA where it will do some good for the rest us?
I truly hope that you just slept through arithmetic in grade school and were not ill. If you were ill, however, it is likely that if we had Obamacare you may have gotten better medical care.
To be clear, that is BUSINESS income and NOT total income from W2's or investments. So that IS 940,000 job creating businesses. Maybe you sleep through English class. Since my 2nd grade teachers were all nuns, I will put my 2nd grade education against anyone. We even had to diagram sentences back then which many reading this probably have never done.
regarding pecentages v large numbers. The distance to the moon is a large number. Yes it is a smaller number and a smaller % than the distance to pluto but it is STILL a large number.
Just curious, is 1% unemployment a large number? Not if you are one of the 99% who have a job but if you are one of the 1% then there is large unemployment. In a war, if 1000 soldiers attack and only 1 is killed that would be acceptable losses to any military general. It is a very small loss %. To the 1 person and his/her family, it is unacceptable losses.
The 15% tax bracket has enabled thousands of middle class people to have tax free long term cap gains and qualified dividends (people in the 10 and 15% tax brackets). I think that is a great thing regardless of how many 1%ers pay it. I grew up with federal medical care so that must be my problem.
Guess what! I never had a nun teach me anything, I had an urban public school education and I did diagram sentences. Man, was that a useless exercise.
So I stand corrected that Reich was talking about a private business owner making over 250K being affected. It still does not mean that this increase will inhibit hiring. Let's do the math. My business makes $250,001 so I wall need to pay a higher tax on that $1. Suddenly, demand for my pizzas skyrockets! (I forgot to tell you my private business is a pizza shop) I now decide to hire a pizza maker for $50K. How do you like that? Now, I make an extra 100K because I hired a pizza maker and can keep up with demand. So instead of making 250K, I make 300K. (The salary does not count toward my tax obligation!) I still make more than I did before, so tell me how the increase inhibits me from hiring? Demand drives jobs, not how much money the boss has. This is how it should be, why do you want to mess up capitalism? No doubt that just 1 person dead in war is horrible, but unfortunately there are risks in every endevour, except of course for banks. When Germany had hyperinflation and wheel barrow of money was needed to buy a loaf of bread, it was a big number. In the end it was still a loaf of bread. Please, be realistic.
So Krugman thinks that there is a Confidence Fairy. Excuse me if I don't pray at the alter of Krugman. Let me think, I seem to remember hearing CNBC and other news organizations report on a thing called the Consumer... hmm what is that other word, Consumer...oh I remember! The Consumer CONFIDENCE Report. It is reported that when the consumer's CONFIDENCE is low then the consumer stops spending money and since they make up 70% of the economy it is up to govt to spend (Keynes). So apparently, consumers have confidence. But a business does not according to Krugman. Who runs a business? I think they are called "people". Do these people spend money? I think so. That would make them, wait for it.... CONSUMERS (who have little confidence). Thus these people don't spend as consumers but that lack of confidence, according to Krugman and his Fairy tale, does not effect their decisions to spend on the business side? Interesting theory. So I guess your Uncertainty ghost is just as dumb as the Fairy theory. I listen EVERY SINGLE DAY and hear business people and reporters say that businesses are not spending BECAUSE of the uncertainty of several items. Tax rates, employee costs, cost of supplies etc. But, they probably don't have a Nobel Prize so what do they know about running a business.
Their first campaign theme was "Obama thinks the private sector is doing fine" which was taken out of context, changing the meaning. This is lying by omission...not the complete truth required by the law.
A current campaign says all the bad things that Obama has said about Romney are "just not true".
Yes they are.
Saint Reagan promised to balance the budget but, in real life, he increased the national debt by almost 300%. Trickle down Reagonomics DOES NOT WORK, as his budget director, David Stockman, has said repeatedly. Reagan himself could say well....shucks, I thought it would work, but for any Republican since 2008 to claim that tax breaks pay for themselves is being intentionally dishonest. They know it's B.S. but they also know it's a good line that still works with the ignoranti as well as the True Believers.
The First Commandment, the prime Directive, of the Republican Party is Lower Taxes for the Rich.
The Koch Brother's AFP (America For the Prosperous) is spending untold millions of dollars to try to get lower tax rates via Mitt, and if they win, it will be money well spent.
Never vote Republican.
I agree. Ideally though we should have a Congress that is smart enough to lay out a step by step plan to walk the tax rates back up to where they are most effective. Real tax reform would tie tax rates to results. For example as unemployment increases, raise taxes on the highest earners. If after a year that doesn't work, lower taxes on the lowest earners. If that still fails, start lowering taxes on high earners. This is just a tiny example, but the idea is to remove ideology from the tax code and replace it with results. Then all you change in the tax code are the parameters. Its transparent, and it allows a basis for a real debate about what a successful tax code achieves.
BTW, what are these rich corporations and individuals doing with their rapidly amassing dollars to improve the world in which they live?
Please cite sources.
Prior to that fiasco--that brought us Enron and reduced or eliminate dividend payments nationwide--uti lities were safe places for retired people to put much of their life savings. But the GOP saw that as a perfect place to try its fantasy concepts. The result was disaster, and investing in utilities became as much a crap shoot as is the rest of Wall Street.
To understand that disaster read the book "Saving America: Using Democratic Capitalism to Rescue the Nation from Economic Folly" (Algora Publishing of New York City). You will also learn of other disasters from the right.
Lower earners will pay a lower percentage on dividends, which in 2013 will range from 15% to 39.6%.
After Reagan, a Republican Senate and conservative House cut taxes in 1981 the economy fell into a deep recession with unemployment hitting 10.8 percent. To address the exploding deficit, the same three culprits reversed much of the '81 tax cuts in 1982, raised the gasoline tax, the liquor tax and tobacco tax during the depths of the recession. Then in 1983, as the economy was struggling to recover, the three raised the payroll tax. Following these five tax increases the economy went on a tear in what the right calls the "Reagan Miracle." So just how did tax increases damage the economy?
There is a story today about Americans paying the lowest rate of income taxes in the past three decades, and yet the economy is still in the doldrums. According to GOP rhetoric that is not possible; low taxes create jobs, except when they don't, which appears to be always.
And too many Americans buy into the GOP lies.
At $70K, your personal income tax rate will not be raised. Any business expenses (upgrades and new employees) can be written off and deducted from business(corpor ate?) profits. If part of your personal income (above your $70K salary) is dividends from your business profits, only that portion above $250K would be subject to higher taxes on capital gains. So you would continue to enjoy Bush era tax breaks on up to $320K of personal income. So your problem is...?
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